Can Restaurant Gift Cards Save January Sales?

 

After the holiday hustle fades and credit card bills arrive, January has historically been a brutal month for restaurants. In the past seven years, restaurant operators across fast food, casual dining, and full-service sectors have felt the squeeze as consumers cut back on spending post-holiday splurges.

Steven Johnson Grocerant Guru® at Tacoma, WA based Foodservice Solutions® wonders, as the foodservice industry battles economic uncertainty amid a presidential transition, many are asking: Can the holiday surge in restaurant gift cards deliver a much-needed boost to January sales?

Historical January Sales Trends: A Seven-Year View

From 2017 through 2023, the month of January has been a well-documented challenge for restaurants. According to industry data:

1.       Fast Food (Quick-Service Restaurants, QSR):

o    Post-holiday spending dips have averaged 8-10% year-over-year. The combination of indulgent December dining and tight January budgets consistently leads to fewer drive-thru visits.

o    Brands that traditionally rely on promotions, such as $1 menu items, experienced temporary volume upticks, though average ticket prices dropped.

2.       Casual Dining Chains:

o    January declines in casual dining sales averaged 12-15%, with guest traffic softening significantly. Consumers seeking to trim expenses often opt to dine at home rather than at chains with $15+ per-person check averages.

o    Notable exceptions occurred in 2019 and 2021 when promotional bundling offered consumers perceived value without compromising check size.

3.       Full-Service Restaurants (FSR):

o    Full-service dining witnessed the most pronounced pullback, with declines ranging from 15-20% post-holiday as fewer families splurge on sit-down meals.

o    These restaurants faced added challenges when labor and operational costs remained fixed, forcing thin margins in sluggish months.

The January slump reflects not only budget-conscious consumers but also broader economic anxiety. Over the years, global uncertainties like inflation, COVID-19, and economic downturns have exacerbated seasonal spending pullbacks.

Gift Cards: The 2024 Difference Maker?

Recent data from Paytronix, a leading digital guest engagement platform, indicates that holiday spending on restaurant gift cards could help restaurants regain January momentum:

·         In-Person Buying Signals Confidence: In-store gift card purchases outpaced digital sales in 2024, marking a reversal of trends and indicating renewed post-pandemic enthusiasm for in-person dining experiences. Consumers spent $7.8 million on in-store gift cards versus $7.3 million digitally.

·         Full-Service Restaurants Lead the Charge: Paytronix data shows that $12.3 million was spent on gift cards for full-service restaurants over the Thanksgiving shopping weekend, compared to $5.2 million for quick-service outlets. Consumers also loaded $66, on average, onto FSR gift cards, while QSR cards averaged $31.

·         Holiday Surge Happened Earlier: Shoppers bought 10% more gift cards during the Thanksgiving weekend compared to 2023, frontloading sales in response to enticing holiday promotions.

This increased holiday spending sets up a vital opportunity for restaurants to drive January redemptions when sales typically suffer most. Whether it's families using newly gifted cards to offset dining costs or consumers craving value-oriented offers, gift card redemptions may buffer seasonal declines.

Uncertainty and the Presidential Transition

While gift cards may provide a sales lift, looming uncertainty in 2024—largely tied to a new presidential administration—could make some consumers cautious about discretionary spending:

·         Historical precedent shows that presidential transitions often spark short-term economic hesitancy as businesses and households adapt to new policies or economic messaging.

·         When paired with inflation concerns or stagnant wages, dining out remains one of the first spending areas to shrink among cost-conscious consumers.

As January approaches, restaurants can mitigate this uncertainty by aligning their gift card strategies with consumer habits. Promotions emphasizing value, special redemptions for gift card holders, or bundled meal offers can help offset broader economic anxiety.

How Restaurants Can Turn Gift Cards into January Success

To combat the slow start of the year, operators should focus on three strategies:

1.       Incentivize Redemptions: Encourage immediate gift card use by offering perks like bonus dishes, special pricing, or loyalty program credits for gift card diners. Full-service restaurants, which already saw record gift card spending, can upsell with appetizers or drink pairings.

o    Example: Olive Garden’s "Bonus $5 Off a Meal" for January gift card use.

2.       Highlight Value Perception: Bundle meals and meal components to stretch consumer budgets. With QSR sales showing slower card growth, brands like McDonald’s or Taco Bell can offer limited-time $5 combos aimed at post-holiday frugality.

o    Example: A gift card holder special featuring a family meal bundle.

3.       Promote Through Multiple Channels: Restaurants must engage consumers online and in-store, reminding them that a gift card equates to savings. Social media, email campaigns, and push notifications can generate traffic by highlighting gift card balances and exclusive offers.

o    Example: Chili’s promoting limited-time gift card cash-back deals for loyal customers.

The Gift Card Outlook

With Paytronix data revealing higher gift card sales, particularly for full-service restaurants, the opportunity to convert that momentum into January traffic is clear. While economic and political uncertainty may prompt spending caution, diners with pre-purchased cards have more incentive to dine out.

Gift cards can—and should—be the lifeline restaurants use to weather January’s chill. If operators proactively market redemptions and position gift cards as tools of value, the post-holiday lull may turn into a period of much-needed recovery.

Are you looking for a new partnership to drive sales? Are you ready for some fresh ideations? Do your food marketing tactics look more like yesterday than tomorrow?  Visit GrocerantGuru.com for more information or contact: Steve@FoodserviceSolutions.us Remember success does leave clues and we just may have the clue you need to propel your continued success.